Humpysque prices for sockeye salmon
A perfect economic storm is brewing across Alaska as the 49th state heads into the heart of the brief and frenzied season that defines its commercial fisheries.
Prices for Copper River sockeye salmon – the highly promoted, first-of-the-season, self-proclaimed best-of-the-best salmon – have been falling like a stone since the season began.
And now, with the Bristol Bay salmon fishery just getting underway with the promise of a harvest of close to 37 million sockeye, the stone looks more like a wall of the Grand Canyon in collapse.
Before the season began, processors still sitting on frozen inventory from last year’s record harvest of 60.1 million sockeye were talking about Bay prices under a dollar pound.
Now Intrafish, an industry website, is speculating on a price of 60 cents per pound, about half of what the Alaska Department of Fish and Game reported as an average $1.15 per pound in the Bay last year.
And that in and of itself is a world away from the $2.88 per pound peak the fish hit in 1988. To bring that number up to date, the U.S. Bureau of Labor Statistics Inflation Calculator says that the same fish would be worth $7.39 per pound at this time.
The late ’80s, it must be noted, were a time of unusually high prices, but according to Alaska economist Gunnar Knapp, the average sockeye price from 1980 to 1991 was $1.11 per pound or about what fishermen were collecting last year not counting inflation.
This was the heyday of the state’s commercial fishing industry. Pink salmon, the smallest and least valued Alaska salmon, peaked at 79 cents per pound in ’88.
On face value, meanwhile, that $1.11 per pound average for sockeye three decades ago is troublingly close to twice the 60 cents per pound being talked about this year. But roll in a correction for inflation, and the decay in Alaska salmon prices looks catastrophic.
A sockeye worth $1.11 per pound in 1985 would be worth $3.13 a pound today, according to the inflation calculator. KDLG, the public radio station in Dillingham on the north side of the Bay, was last week reporting fishermen speculating they might get 75 cents per pound for sockeyes bled and refrigerated before delivery.
Because of improved quality, processors are willing to pay a premium for those fish into which fishermen put some initial processing effort. But even with the premium, the fish would be worth only about a quarter what any old sockeye thrown in the hold of gillnetter was worth three to four decades back in time.
Once most valuable resource
There was a time when salmon were the state’s most valuable resource.
“In 1922, the total revenue derived from all sources of taxation by the Territory of Alaska amounted to $563,000,” the state’s salmon processors complained in a 1923 Alaska newspaper advertisement claiming the territorial legislature was on the verge of taxing them out of business.
“During that year, taxes directly levied on the salmon fisheries fishing industry were as follows: Per case tax on pack, $216,000; income tax, $21,000; trap license fees, $83,000; gillnet license fees, $7,400; seine license fees, $5,000, or a total of $332,400.
“Under the new graduated tax imposed by the last territorial legislature, these taxes will be doubled for the years 1923 and 1924.
“It should be remembered that the approximately 60 percent of the territorial revenue which is borne by the canning industry is made possible by the combined presence of the fish and the cannery investment, that each is practically worthless without the other and that both are entitled to protection from every standpoint of common business sense.”
These days, the Alaska salmon fisheries produce about twice as many fish as in territorial days but don’t pay enough in taxes to cover the state’s cost of managing, policing and promoting them, according to the latest report from the University of Alaska’s Institute of Social and Economic Research.
There is, however, a benefit of about $20 million in revenue to fishing communities, depending on the size and value of the catch. The state tax levied on salmon and then returned in part to fishing communities is based on a percentage of what is paid fishermen when they land their fish.
Thus the tax revenue goes down when prices go down.
The fishing communities that share in the revenue, along with the approximately 11,000 people who hold Alaska limited-entry permits allowing them to fish commercially for salmon, were flying high as the 1980s came to an end with prices for wild-caught salmon at their peak.
Looking to keep the boom alive, the state in 1990 banned salmon farming (other than the industrial-scale salmon “ranching” now practiced in some parts of Alaska) in the hopes that such a ban would maintain the position of the Alaska commercial fishery as the world’s major salmon producer.
Unfortunately, the ban might have had exactly the opposite effect by helping to keep salmon prices high long enough for Norwegian salmon farmers to grab a solid foothold in the market on the way to an eventual takeover.
A salmon farming industry just starting to take off in Norway in 1990 exploded into the new millennium and spread globally.
The Norwegians remain a dominant player in the industry today, but salmon farmers are now established in Chile, the United Kingdom, Canada, the Faroe Islands, New Zealand, Iceland, Norway, France, Spain, Greece, Turkey, Denmark, Finland the Russian Federation, according to the Food and Agriculture Organization (FAO) of the United Nations with Japan, which pioneered the ranching of salmon, and China just getting started in the business.
The FAO charts a mountain of growth in farmed salmon since 1980:
Knapp saw the handwriting on the wall when he a decade ago warned the Alaska fishing industry that “Alaska has become a relatively small part of total world salmon supply. Alaska salmon prices are driven in significant part by global supply and demand
conditions which influence prices for all salmon.
“Rapidly growing farmed salmon production glutted world markets in the 1990s and drove prices down for both farmed and wild salmon.
“When farmed salmon prices fell in the 1990s, wild salmon prices fell too, because buyers had cheap alternatives to wild salmon.”
This a reflection of the economic law of supply and demand, which basically dictates that when there are more sellers than buyers, prices go down; and when there are more buyers than sellers, prices go up.
Anyone who has joined in the bidding for anything on eBay should understand the basic concept. And the problem of the day is that there are more salmon sellers than salmon buyers, most especially when it comes to wild salmon.
Processors couldn’t sell all the fish they bought last year and are now paying high costs to maintain those frozen fish in cold storage. The Alaska Congressional delegation has tried its best to bail them out with government subsidies.
Sen. Lisa Murkowski, R-Alaska, in May announced she and her Alaska Congressional colleagues were applauding “the U.S. Department of Agriculture’s (USDA) announcement that it has approved the purchase of up to $119.5 million worth of Alaskan sockeye and Pacific groundfish, which will be distributed across the country through federal food assistance programs.”
“Alaskan fishermen stand ready to help feed their communities, and these purchases provide them the perfect opportunity to bring healthy Alaskan seafood to the tables of families who need it most,” Murkowski proclaimed, although the fish weren’t going to feed Alaska communities and the purchase was really an attempted government bailout in the wake of an Alaska Seafood Marketing Institute (ASMI) plea for help rather than a charitable move to feed the hungry.
The USDA’s “purchase of up to $67.5 million of Alaska sockeye salmon products, with up to $37.5 million for canned and $30 million for frozen sockeye fillet portions…will be a boon for Bristol Bay and other communities immersed in sockeye fishing and processing,” ASMI admitted after the deal was done.
And the government buy did relieve some of the pressure. Unfortunately, consumers were at the same time turning away from pricey salmon and the farmers were slashing prices to maintain sales.
“A steep decline in seafood activity has merchandisers scurrying for sales remedies,” Supermarket News reported at the end of April. “One potential solution? Position seafood as a snack instead of a main meal.”
But there is no indication that smoked salmon – no matter how popular in Alaska – has displaced M&Ms, Hershey’s chocolate bars, Reese’s peanut butter cups, Ritz crackers or Doritos,” which Mashed reports to be the country’s top-selling snacks.
Nor does smoked salmon appear to threaten Planters peanuts, Jif peanut butter, Oreo cookies, Lay’s potato chips or Pringles potato chips which round out the top 10.
Snacks or not, salmon sales are lagging and prices continue to plummet,
The NASDAQ Salmon Index has prices down nearly 8 percent for the week and more than 25 percent in the past four weeks. Up until the Alaska salmon season began, prices looked to be improving, but they have since fallen off a cliff.
A picture says 1,000 words here:
Prices are now below where they were at this time last year when the big Bristol Bay catch sparked a steep decline that lasted from weeks 25 to 35 of 2022.
Processors still sitting on 2022 inventory and looking at these numbers can’t help but be fearful of paying too much for Bay sockeye now, and that’s seriously bad news for commercial fishermen in Alaska and the communities that count on salmon-tax revenue.
Because the days when Alaska salmon fishermen could negotiate for higher prices are over. Once a dominant market force, those fishermen are a bit player even if fully united to hold out for higher prices as they did in 1991 when Bay sockeye dropped to 42 to 55 cents per pound.
Salmon worth 42 cents per pound when Bay fishermen went on strike in ’91 would, ironically, be worth 94 cents today, according to the inflation calculator, with a 55-cent-per-pound fish worth $1.23 or slightly more than the average price last year.
What was bad then looks like it would be good, or at least better, now. This is a perfect economic storm.